If you ask any entrepreneur who’s taken the leap into setting up their own gig, they’ll tell you; starting up a new business can be a bit of an emotional rollercoaster. It feels like investing a mixture of stress, excitement, pressure and passion, and doing everything you can to make sure it grows into something successful that you can be proud of.
That being said, when you look into the statistics of how many of those new businesses succeed in realising their vision and managing to stay sustainable, the figures are quite disheartening. Globally, Inc.com reported that 96% of all businesses fail within the first 10 years of operation. Of course, that statistic encompasses a lot of startups internationally, in different markets and of varying nature. So if we narrow the lens to New Zealand, what do the stats look like?
Well, as recently reported in NZ Business Magazine,
“According to MBIE, 58 percent of Kiwi businesses born in 2010, with no employees, ceased to exist by 2015. With up to five employees the figure was slightly better at 43 percent.”
Beyond that, only 37 percent of micro businesses or start-ups exist after two years in the market. Overall, this paints a fairly negative picture for new business owners and begs the question; what can we do to ensure that we succeed in our ventures?
At Yellow, we’ve worked hand in hand with a number of Kiwi businesses to help nurture their growth journey and bring in those ever-important new leads. Through this, we’ve learnt a thing or two around what works and doesn’t in new business.
In this blog, we’ll dig into three key business elements to focus on in your start-up phase to set yourself up for success in the future, as well as some actionable ways to make it happen.
Unless you’ve got a background in financial services or have tried your hand at running a business, it’s unlikely you’ve gone into business because of a love of numbers, and unfortunately when it comes to running a small business, numbers matter - a lot.
One of the biggest reasons that a lot of small businesses fail is simply because they can’t pay their bills. This is usually because of the disparity between profit on paper, and net cash flow that’s actually in the bank. Cash is what’s used to do all of the important and good things that come along with running your own business; paying your employees, investing in inventory or your people, paying contractors, keeping the lights on in the office, and buying that pool table for the office that Harry from sales has been begging for.
However, you can’t do any of these things if there’s no cold, hard cash in the business account, and unfortunately for many business owners, there isn’t enough to go around. Why? People don’t pay their bills when they say they will.
As Kiwi PR writer, journalist and small business owner David Cormack puts its;
“The other part of running a small business that has really surprised me is the number of people who just don’t pay, either on time or at all. We have contracts with all our clients, we stipulate they must pay us on a certain day, and often when that day rolls around, a number won’t have paid us.” - The Spinoff 2018
The reason behind slow payment is often a flow on effect from two things. Firstly, if company ‘A’ quotes a client, does the work as defined and then invoices company ‘B’, but company ‘B’ has gone into liquidation and can’t pay company ‘A’, then suddenly company ‘A’ is lacking cash flow and can’t pay company ‘C’, ‘D’ or ‘E’ for the work they completed and invoiced either. In short, everyone loses here.
The second common instance is that bigger players in the business world who do have the cash flow, tend to pay in 90 - 120 periods, allowing them to manage their cash flow better by collecting payments from the smaller players throughout the three-month period, and paying out when it best suits them. Unfortunately, if you’re a small business making ends meet, waiting for 90 - 120 days to get paid can feel like an eternity given bills are due monthly - and it’s likely that you’re going to put off paying your invoices too.
One of the biggest challenges for an entrepreneur is the fear of failure, as if the business start up fails, they feel that they themselves have failed personally. It makes sense too, as usually you go into a start-up because you’re passionate about what you’re doing or creating, and passion projects are personal in nature. Smita Singh, senior lecturer in international business, strategy and entrepreneurship at AUT, says this is proven by research, where the identity of an entrepreneur can get closely intertwined with his/her business;
“If a business fails, then it doesn’t mean that an entrepreneur fails. Failure doesn’t mean that an entrepreneur cannot be involved in business again,” - NZ Business
That means that when you’re steering the ship, sometimes you have to do what you can to remove emotion from the equation and untangle your sense of self from your business, in order to make the ‘right’ decision for your business to thrive.
In saying that, one of the reasons that many entrepreneurs get into business in the first place is because they have a genuine passion for their product or service, and that passion often means quality work that customers love and are willing to pay for. That said, it’s important to find the balance between passion and logical business decisions.
In an oversaturated market where almost anything and everything is already being sold, finding your start-up’s unique selling point and communicating your difference to your audience is, and we can’t stress this enough, so important. If you’re running an online business you might already be quite familiar with this, but modern consumers prefer the digital approach to researching where they’re going to buy from.
Some Kiwi businesses still have a word of mouth approach to their marketing, waiting for customers to find them through selling something that’s just downright great enough to talk about, and failing to advertise their services and products to existing and potential customers. To some extent, this will work well enough to maintain, but more often than not, will limit your potential growth.
Digital marketing ensures that your business gets put in front of people you wouldn’t otherwise reach, opening up your potential to generate leads and close sales, and making your brand known in your market. This is crucial in the beginning stages of your business, as people can’t buy from you if they don’t yet know you exist.
It’s not just about promoting your products or services either, it’s an opportunity to connect with your audience and get to know them, as well as how they interact with your business. Content or social media marketing is a great example of this - through creating useful and engaging content that delivers value, your audience will grow to know and trust you, nurturing down the path to finally making a purchase.
Regardless of what the stats stay, if you’re reading this blog right now, you’re already a step ahead and thinking about what you need to do to survive, before any hard times arrive. Plus, with the right measures in place, you’ll be in a fantastic position to grow your business from it’s incubator stage, into the full version of what you dream it to be.
If you’re interested in making sure you’ve got all the cornerstones in place, you can download our Business Starter Checklist for FREE below, or if you have any other questions, feel free to get in touch!